Accuracy - Related Penalties For Taxpayers Involved In Tax Shelter Transactions Audit Technique Guide

National Tax Services, Perspection Inc.

Informations

• Publié par: Sior
• Nombre de lectures: 27
• Langue: English

Extrait

Internal Revenue Service

Accuracy - Related
Penalties For Taxpayers
Involved In Tax Shelter
Transactions

Audit Technique Guide (ATG)

This material was designed
specifically for training NOTE: This guide is current through the publication date. Since changes
purposes only. Under no may have occurred after the publication date that would affect the accuracy
circumstances should the of this document, no guarantees are made concerning the technical
contents be used or cited as accuracy after the publication date.
sustaining a technical
position.
The taxpayer names and
addresses shown in this
publication are
hypothetical. They were
chosen at random from a
list of names of
American colleges and
universities as shown in
Webster’s Dictionary or
from a list of names of
counties in the United
States as listed in the
U.S. Government
Printing Office Style
Manual.

www.irs.gov
Training 5767-001 (08-2004)
Catalog Number
Accuracy - Related Penalties For Taxpayers
Involved In Tax Shelter Transactions
Audit Technique Guide

TABLE OF CONTENTS


Chapter 1 - Introduction..................................................................................................1

Coverage.......................................................................................................................1
Overview1

Focus ............................................................................................................................2
Tax Shelters..................................................................................................................2

Tax Shelters continued .................................................................................................3


Penalty Policy: Facts and Documentation to be Developed During the Examination ...4


LMSB..4
SB/SE............................................................................................................................5

Managerial Approval of Penalties .................................................................................5

Chapter 2 - Accuracy-Related Penalty – IRC § 6662........................................................6

In General .....................................................................................................................6

IRC § 6662 - Accuracy-Related Penalty .......................................................................7

Penalty Amount.............................................................................................................7

Definition of Underpayment...........................................................................................7


Chapter 3 - Negligence or Disregard of Rules or Regulations.......................................9

Negligence ....................................................................................................................9
Disregard of Rules or Regulations ................................................................................9
Adequate Disclosure...................................................................................................10



Chapter 4 - Substantial Understatement.......................................................................11
In General.....................................................................................................................11

Definition of Tax Shelter for Purposes of IRC § 6662(d)..............................................11

Substantial Authority Exception .................................................................................. 11

Chapter 5 - Substantial Valuation Misstatement.........................................................13

In General ................................................................................................................... 13


Chapter 6 - Fraud Penalty – IRC § 6663........................................................................14

Introduction ..................................................................................................................14

Chapter 7 - Reasonable Cause and Good Faith – IRC § 6664.....................................15

Reasonable Cause & Good Faith Exception - In General............................................ 15

Taxpayer’s effort to assess the proper tax liability........................................................16

Experience, Knowledge, Sophistication and Education of Taxpayer .......................... 16

Reliance on Advice ..................................................................................................... 16

Reportable Transactions............................................................................................. 17

Nontax Matters.............................................................................................................17

Advisor Independence ................................................................................................18

Special Rules for Tax Shelter items of a Corporation .................................................18

Chapter 8 - Announcement 2002-2...............................................................................20

Introduction ................................................................................................................. 20

“Issues Raised During An Examination” ..................................................................... 20

Applicability of Announcement 2002-2........................................................................ 20

Chapter 9 - Policy Statements......................................................................................22
IRS Commissioner Memorandum dated December 29, 2003 .................................. 22
LMSB Commissioner Memorandum dated December 20, 2001............................... 22

LMSB Commissioner Memorandum dated July 10, 2003......................................... 23

Chapter 10 - Audit Techniques –
Development of Potential Penalty Issues for Tax Shelter Cases..............................24
Objective ................................................................................................................... 24
Inquiries relating to accuracy-related penalty............................................................ 24
Inquiries relating to Reasonable Cause & Good Faith .............................................. 27

Inquiries Relating to Reliance on Advice...................................................................29



Exhibit 1 – Penalty Policy Statement (P-20-1) ............................................................... 32

Exhibit 2 – LMSB Commissioner Memorandum dated December 20, 2001...................35
Exhibit 3 – LMSB dated July 10, 2003............................ 39

Exhibit 4 – LMSB-SB/SE Memorandum dated August 21, 2003 ....................................41

Exhibit 5 – Accuracy-Related Penalty – IRC § 6662...................................................... 45

Exhibit 6 – Substantial Authority List............................................................................... 49

Exhibit 7 – Determining Reasonable Cause and Good Faith...........................................51

Exhibit 8 – Excerpt from Treas. Reg. § 1.6664(f) – Special rules for substantial
understatement penalty attributable to tax shelter items of corporations.......52
Exhibit 9 – IRS Announcement 2002-2...........................................................................54
Exhibit 10 – Commissioner Memorandum dated December 29, 2003............................58



Table of Contents / Chapter 2

Internal Revenue Code Search / Internal Revenue Manual Search / Treasury Regulations Search

Chapter 1: Introduction

Coverage

This audit technique guide (“ATG”) was developed to support the field in the
consistent development and application of penalties when a taxpayer was
involved in an abusive tax shelter, including “technical” tax shelters. This ATG is
a Service-wide document, discussing penalty policy and considerations
applicable to all taxpayers involved in tax shelter transactions.

This guide is not intended to be all inclusive. In most cases, the examiner should
refer to additional sources of information, including listing notices and disclosure
initiatives, even if there is a thorough discussion of the issue in this guide.
Although this ATG includes information from existing position papers, audit
technique guides, and CPE materials that deal with specific listed transactions
and identified transactions that have not been listed, it is not intended to replace
these materials. The examiner should consult the penalty handbook, related
audit technique guides, appeals settlement guidelines, as well as subject matter
advisors, technical advisors and local Chief Counsel Attorney